Companies on the fast track often bend the rules with
investors and clients to keep up their growth curve. In the
following excerpt from MoneyHunt: 27 New Rules for Creating and
Growing a Breakaway Business (HarperCollins), authors Miles
Spencer and Cliff Ennico, co-hosts of MoneyHunt, a TV show
featuring entrepreneurial success stories, tell the tale of one
entrepreneur's say-anything strategy that won over clients and
investors.

Successful businesspeople are, first and foremost, salespeople.
If you cannot sell, do not, we repeat, do not start your own
company. We're all comfortable selling ourselves when we're
certain we can deliver all the things we promise. But what about
the times when we're not sure we can deliver? We've been
told since childhood it's not wise or ethical to promise
something if you know there is a risk you'll break a promise.
Sometimes, however, being a successful salesperson and getting the
big deal that makes or breaks your company requires that you do
precisely that. And that takes sheer audacity.

When you sell audaciously, you're taking a big risk. Except
in some extraordinary circumstances, you won't get away with
it. In the short term, you can succeed with BS. But sooner or
later, you have to prove to the marketplace (and to yourself) that
it isn't just BS. You have to back your words up with real
performance.

The Audacious Entrepreneur

Chris Sardoni (name has been changed) started his Web page
design business right out of college with a rowdy bunch of his
former fraternity brothers, convinced they could make a go of it in
New York City's "Silicon Alley." With operations in
their one-bedroom apartment on the Upper West Side of Manhattan,
things looked surprisingly like they did at college, except now
there were a few more computers, some high-speed access lines to
the Internet and a little money.

Before they had even created a single Web page, they had pitched
and won a project for a major toy company that wanted to build a
community of avid game players. Chris knew the toy company was
flush with cash, technologically incompetent and under pressure to
catch up. Still, they weren't committing just yet. During the
presentation, a critical moment had arrived: Chris had to shine
now, or risk losing it all. It was a spot he would find himself in
more and more.

Business negotiations are often like poker games, and Chris had
played a lot of poker in his college fraternity. He knew well the
meaning of the old poker adage: When in doubt, bluff. "I want
this to be a big program with a big commitment that would make a
major impact on the community," he said. He and his
"staff" were busy on multiple projects, Chris said, and
had to manage their time diligently. So if the client said no now,
they may lose the opportunity to work with Chris and his design
team for up to 12 months.

Chris referred to projects he and his partners had worked on,
failing to mention the fact that they were in college at the time
and didn't truly deserve credit for the creation. He even
listed as current commitments a few projects that his technical
person was thinking about doing someday but hadn't really
started. The client started looking interested: No middle manager
in a large corporation wants to be known as the person who had the
opportunity to work with the hottest up-and-coming Web design team
but turned them down because they looked like kids.

Chris had them hooked, and they were just waiting to be reeled
in. So the master poker player upped the ante. He told the
prospective client he was going to sketch out contract terms on his
computer then and there for their review, because he had meetings
that afternoon and the next morning and would not have time to
focus on the details. The toy company took the bait and signed a
memorandum of understanding that very afternoon.

Chris's design team worked evenings and weekends and
developed an award-winning Web site for the toy company. Soon Chris
was getting telephone calls from other companies who wanted
"the same people who did that wonderful site" to do their
Web site design work. Chris struck fast, making the same promises
he had made to urge the toy company to sign.

Party Time

With several projects underway and no income to speak of yet,
the company needed a cash infusion. So Chris pulled out all the
stops and threw a few blowout parties at one of the hottest
restaurants in Manhattan's Greenwich Village. An invitation to
one of Chris's parties was essential if you were to be
considered a player in Silicon Alley, and the parties were chock
full of dealers, Wall Street hitters and clients, present and
future.

Within two weeks of the networking parties, Chris had
commitments for over $2 million in venture capital. In typical
Chris Sardoni fashion, he overpromised, pressured his investors to
complete their transactions in ridiculously short time spans, and
insisted that they not only invest, but also bring the institutions
they often did deals with along with them. Late at night, however,
after the last party and the last meeting with his first-round
investors, Chris wondered how long it would be before all his
promises came home to roost.

Soon Chris found himself overwhelmed by his company's lack
of organizational structure, constant changes in corporate
direction, and outright failures. Two of their last three major
projects were out of control technically, and Chris's company
hemorrhaged money. The estimates that they had made to their
clients, which seemed so grandiose and laden with profit margin at
the time, became ball-and-chain projects of undeliverable
expectations that weighed down on the already understaffed
programming department with numerous corrections, changes and
improvements.

Round Two

Soon enough, Chris needed a second round of financing, as he saw
clearly that the money he'd raised in the first round would not
last but two more quarters at his current burn rate. Soon after his
appearance on MoneyHunt, he met separately with his
first-round investors and tried to explain the numerous reversals,
blown deadlines and unfulfilled promises, in terms of both the
business and its profitability and investor expectations.

Surprisingly, no one was particularly upset at his explanations.
As a matter of fact, many of them shrugged them off, ascribing no
personal blame to Chris but rather to the vicissitudes of the
rapidly changing new media market. But those investors who had
heard the promises before and who had been fooled by both the
market and by Chris were not at all interested in throwing bad
money after good.

With only two months of cash left at his present burn rate,
Chris's desperation grew. He fairly jumped at the chance to
meet with a new investor who had seen him on MoneyHunt and
was interested in doing business.

When the deal progressed more slowly than he would have liked,
Chris resorted to the threats that had worked so well for him in
the past. "We have 30 days to complete a deal, or I'll be
forced to revalue the opportunity based on this booming
market," Chris thundered. Immediately, and quite shockingly to
Chris, they snapped into action.

To the astonished delight of each of his first-round investors,
Chris raised enough money to allow him a second chance at finding
the ever-elusive long-term revenue stream, to avert lay-offs for a
few months, and to pay his princely salary.

Risky Business

There's an old saying, "If you want something badly
enough, you will get it . . . badly
enough." The person who wants or needs a deal more than the
other person will end up doing the deal on the other guy's
terms, as Chris Sardoni shrewdly realized. By promising clients
more than his design team could deliver, Chris won important
contracts that gave him the operating revenue he needed to hire the
extra developers who could get the jobs done. By promising
investors a return on investment he knew couldn't be justified
by his firm's revenues and profit margins, Chris capitalized on
the Internet fever of the time, knowing full well that in a hot
market, stocks often rise or fall based on people's perceptions
and emotions, with total disregard for the hard numbers that should
drive investment decisions. His investors, who were no fools, were
willing participants in a con game whose only victim is the next
person to buy into the company.

Chris's strategy, while extremely successful, comes at a
high price. Even though he's technically a millionaire and has
survived two successful rounds of venture financing, he must ask
himself every night: "When will the bubble burst? When will
people start demanding performance from my company? When will the
chickens come home to roost?" While overpromising is sometimes
the only way to build a business in a tough market, sooner or later
you must live up to those promises. The money that comes from hype
is very often a short-term loan--the longer-term financial security
a company needs to grow is based on solid performance for
customers, investors, employees and other constituencies of a
growing company.

The line that separates aggressive marketing from outright fraud
is an extremely thin one. As Abraham Lincoln wrote, "You can
fool all of the people some of the time; you can fool some of the
people all of the time; but you can't fool all of the people
all of the time." Sooner or later, someone realizes the
emperor is naked, and that's when it all comes undone.

From MoneyHunt: 27 New Rules for Creating and Growing a
Breakaway Business by Miles Spencer and Cliff Ennico. Copyright
1999 by MoneyHunt Properties LLC. Reprinted by arrangement with
HarperBusiness, a division of HarperCollins.